1929 – Unleashing the Power of Real Estate Syndication for Passive Income with Rise Capital Investments’ Emma Powell

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1:06With us right now, it's Emma Powell. Emma, you are the founder and chief investment officer with Rise Capital Investments and the founder of High Rise Group. Your websites are risecapitalinvestments.co and highrise.group. Emma, it's great to have you. Thanks for having me on. I'm super excited to talk to you and other entrepreneurs about what we're doing. Awesome. Go ahead and give us an overview. What is Rise and what is High Rise? Well, High Rise is a group that I started to syndicate commercial real estate deals. And I was just doing it myself. It was a solo shop. And I put together an investing club, a free club, and was attracting other investors who wanted to get into commercial real estate.

1:47And through doing several deals to that investing club, there was a group of people who just rose to the top consistently. They always did what they said they were going to do. And we were able to do some small deals together to try each other on for size. I had been wanting to start an investment fund for a while, but it's a big business. And I was really nervous to, I didn't want to do that as a solo shop. I was looking for some partners. I was looking for a CEO specifically. And so eventually I found this group of people. I thought they, I really want to do business with this group. And so we started Rise Capital Investments to basically scale what I was doing at HighRise.

2:17And then I migrated HighRise over to being just an investor attraction marketing company. So pitch deck design, webinars, things like that. So that's what I am doing as my solo now, helping other business owners and entrepreneurs attract capital. And then at Rise Capital, we'll help them actually invest that capital. Yeah. Well, what is the tell me about, you know, for for business owners and leaders, let's say that, you know, they've got their business running. It's a good thing. I think most of us believe in the concept of multiple streams. why might a real estate and correct me if I'm wrong, a syndication deal, right?

2:55Why might that be a good fit for a business owner that doesn't necessarily want to start a second business? So they want some passivity there, right? Where they're not having to very actively manage things. Give us, take us through maybe the pros. Well, the one you just mentioned, having a passive stream of income. People think of diversification like, well, I'm going to have some commercial real estate. I'm going to have some stocks. I'm going to have some crypto. I'm going to have some treasuries. That is a way to diversify, but there are a lot of other ways to diversify investment strategies.

3:27And one of the ways that people think about, but they don't think about as a diversification technique is passive income. So think about how many businesses most business owners actually own and manage, sometimes two to three businesses. And sometimes they're related like mine, where it's investor marketing versus investor placement. They're very related and overlapping, but it's still two different businesses. And business owners think to make more money so that they can retire well, they need to go start another business because that's how we think. We're entrepreneurs and we're always planning the next business.

3:55And we don't often think about diversifying across active and passive income sources, but usually around age 45, somewhere in there, those business owners start to feel like, I don't know how much longer I can do this just because I saw my brother die early from a heart attack or somebody became disabled or I have a special needs child. And they start thinking, I don't know how much longer I can keep doing this. And I don't know if it's safe to plan on me being able to keep doing this till I'm 65 or 70 years old. And so they start kind of thinking outside the box, getting a little bit more passive.

4:25So that's the biggest thing that drives investors into looking into these types of passive investment type of income. And they may already be maxing out some sort of a solo 401k, or they may be maxing out other retirement accounts. And for high income earners, those maximum amounts just are not going to provide the kind of retirement that they're looking for. And so they're taking some disposable income and thinking, how can I invest this passively so that I can retire if I need to? Most entrepreneurs say, I never want to retire, which is great. It's true. But you have to ask yourself, could you, if you needed to?

4:56And that's the question a lot of them are asking themselves. The second reason is tax abatement. You are a business owner. You are making probably 100 % earned income, which is being taxed at the highest rate it can possibly tax. Now, business owners get a lot of tax breaks. They have a much better deal than say two people working at W-2. They're kind of out of luck there. So business owners are taking these deductions and they are using them to their advantage to pay less taxes. But the issue is, is to get the massive amount of deductions that they need in order to offset a high income. They are needing to expand the business, build a new building, buy more equipment.

5:31And so they're in this trap of constantly expanding, building a new restaurant or building a new store, whatever it is, or launching a new product, because they have to keep expanding in order to keep getting those write-offs. And so instead, a lot of business owners, as they're trying to cycle down a little bit, have a little bit more free time, golf some more, spend some more time with their kids, take care of somebody with health problem, is they're needing to do it more passively to get unearned income. And so that is taxed at the lower rate. And it also is more passive so they can focus on what they need to do.

6:01Like you said, nobody wants to go out and start like a landlord side hustle. Once they own two, three, four rental houses, which most business owners tend to have a couple, it turns into its own part-time business. And so what we help people do is scale into real estate in a bigger way without putting on more management responsibility onto them so they can save on taxes and get more passive income so that they can think about what comes next. What would you say would be realistic returns for the market knowing that obviously there's a wide range in what you may end up experiencing. But what would you say would be, yeah, these are pretty typical.

6:37So I just want, you know, again, I don't want to oversell it, but then I don't want anyone to miss the opportunity. But, you know, how might it compare to a 401k IRA type return? That's a really great question. I don't think that people often think through like, what are typical returns for this asset class? Because then you're going to hear something you're like, oh, that sounds really high. It might be a scam. Or you might hear something that's too low and you think to yourself like, oh, I can do better in this other asset class. So really understanding like what's normal for that asset class is an important first question to say, is this something I even want to consider?

7:09So I look at real estate in between more aggressive types of investment, like startup and funding, like private equity, they're going to put into somebody's business that doesn't cashflow. And you're really waiting for a big exit. That's more like what venture capital firms do. And so they're going to lose on 99 businesses to make it big on 100. And for most smaller investors, it's just really not a viable strategy. But business owners tend to be over invested in private equity in their friends, businesses or in their angel club. And so real estate does better than the stock market. It has to do better than the stock market because the stock market is a public market that is highly regulated.

7:41And the ease of entry is very simple. You can get in for small amounts of money. Anybody can do it. You just go get yourself a free account on M1 or Robinhood, and you put in a little bit of money into that and you're off to the races in the stock market. And so if we can't beat those returns, because we are a private placement, we're not as regulated. So there's a little bit more knowledge and education upfront and the minimums tend to be much higher. And so if we can't beat the stock market, why on earth are we even out here offering this? But we also want to offer good cashflow and stable risk adjusted returns.

8:11And so real estate is one of the most risk-free investments that people can make, especially commercial, multifamily, stealth storage, things like that. So it's somewhere in between the super aggressive VC world and the stock market world. So 10 to 12%, if you're a lender, like lending out private money for fix and flip loans, or you're going to help somebody buy a commercial building, 10 to 12 % is pretty typical with that all the way up to maybe 20 to 30 % on something that's a little bit more risky, like something that needs a lot of work, new construction, things like that, mobile home parks that are lower expenses.

8:44Multifamily tends to be in the 14 to maybe the 18 range, depending on how much construction it needs. And those returns have really held consistent when the market is up and when the market is down. And the reason why is because that's what investors can tolerate compared to their other investments. And so if it's not hitting those types of minimums, we're not even going to look at it or offer it to our investors. Yeah. And forgive me if you already mentioned this and I'm spacing it. So typical minimum investment and then part two, what's not even related, but I don't want to forget to ask this is where can this go sideways?

9:19And I ask that in that, how can I be a smarter, how can I be a better investment to kind of hedge my risk a bit? I can tell you've been doing this for a while. You have really good questions and things that every investor should be asking themselves upfront. And a lot of them don't even think to ask themselves that. So minimum investments in a private placement tend to be somewhere on the$50 ,000 on the low end, up to$250 ,000 on the high end. Usually the high end ones are for accredited investors only who have a little bit more access to these types of private placements. 50 ,000 would be on the low end.

9:51You can have some unaccredited investors in there. I don't personally feel comfortable with unaccredited investors putting in that much. They have to have a net worth of a million dollars or more, not including their personal home. And that's giving them a little bit more exposure and experience to financial markets. So that's why we're looking at those higher minimums. There is another option now that is becoming popular as a crowd fund, where accredited and unaccredited investors can participate at much lower minimums. And you'll often see those offered side-by-side, an investment that has higher minimums for accredited investors.

10:20And so they can either go in through the crowdfund or through the main fund. And it just is really up to them how much they want to put in. It's also a great way to test drive a new operator, even if you're an experienced investor, because where things can go sideways is the operations. You are investing in a business. So multifamily, they get tenants, they have managers. It is a business that just happens to have a real estate component underlying it, that's about commercial real estate. Even if you're in a residential portfolio and you got a bunch of single family houses, you are looking for tenants, you're hiring property managers, like this is a business.

10:49And so if you don't manage it well, things can really start to come apart. And what you'll see there are people not putting aside enough reserves. That's one question. It's always like, how much are you putting aside at the time of purchase to be able to cover expenses? With single family, everybody knows you put aside six months of expenses for the mortgage, just in case it goes vacant for a while or if you have a large repair that needs to be done. Commercial real estate, it's the same thing. There is an exception to that. It's called triple net, where the tenant is responsible for all those major repairs, but you still need to have reserves in case it goes vacant for whatever reason.

11:21Those leases tend to be five to 10 years long at least. So it's a little safer from that and the reserves don't have to be quite as high. But going into a deal undercapitalized is a huge mistake I see again and again and again, especially in the environment where interest rates were going up on adjustable rate mortgages. So they were using their construction money just to pay the mortgage and they weren't able to do the value add over the last year, year and a half. And we've seen a lot of deals go sideways from just going in undercapitalized and the rate cap to keep your rate low. They are not lasting the life of a loan.

11:52The loan is only five, maybe seven years on a commercial loan. We don't get 30 year mortgages like you do in single family. And so those rates can be going up and you're going to want to buy a rate cap. And the expense of purchasing that rate cap in an environment like what we're in can be very expensive. And so people are spending construction money again to buy another rate cap or spending that money on other things other than fixing up the property. And so that has caused a lot of pain over the last couple of years. Anytime you have a bubble, like especially multifamily had a big bubble, you're going to see people flowing into the space with both money and wanting to run the business.

12:26And that bubble burst. And a lot of people just didn't have the experience to be able to keep their portfolios healthy when these tides of rising interest rates started to kind of hit the hit the industry. Now, I wanted to ask you about High Rise Group, because this is a kind of a cool service. Do you mind sharing just a bit about what High Rise Group is and how you participate in kind of designing amazing pitch decks? Yeah, I was always doing the pitch decks for my own group. So when I first got started, we're buying a multifamily building and we need a pitch deck to attract investor capital.

13:02And the first one, I have a graphic design information design background. I have a graphic design certificate and a business degree. I basically made presentations for a living as part of my marketing design background. But the first time I went to go make a pitch deck for my specific business, I realized like this is very different than anything I've ever done before, attracting investor capital. And so I ended up hiring somebody to help me to consult with me through this process because I have the graphic design skill. I just didn't really know how to set it up. And she was incredibly helpful to helping me template out some pages, consulting with me on what I needed to include and all of that.

13:35And then after that, I started doing all the pitch decks for our own investments. But now that we are calming down on how much we're buying, we're doing more lending and things like that, just kind of pivoting with the economy. I really miss doing pitch decks. And some of my partners would reach out to me and say, hey, can we use your template or can we hire you to do our pitch deck for our project? And for a while I was saying no. And then I realized, okay, I really, I really miss this. And so I started offering it outside of my own investments and outside of my own partners. If people need to attract capital, they need to trust somebody who has done it before.

14:05I'm also an investor passively in startups, real estate, several sports startups, various things. And I, as an investor, know what I'm looking for in a pitch deck. I also run a free investing club that meets once a week. We look at dozens of pitch decks every single year and hundreds that I look at privately in order to screen for that club. And so I'm in my, you know, I'm down in the weeds in pitch decks all day long. And the information that you present, the order that you presented in, the stress that you give to it, the story that you tell to investors needs to appeal to an investor and make sense to an investor.

14:36And sometimes operators either are thinking like operators or they just don't have the information design and graphic design background to make a great pitch deck. This is the first impression of your business. And you are trying to attract capital from wealthy individuals and you're too cheap. It looks cheap. and how is that looking like? How am I going to be able to run this business and have cash reserves if I don't even have the liquidity to pay two, three,$4 ,000 for a professional pitch deck? That is the first thing I'm going to put towards my investors. So that's the lesson I really want people to learn.

15:06Like this pitch deck is often an afterthought and it should not be. If you are trying to attract capital, the pitch deck is your most important tool in order to being able to do that. Emma Powell, your websites are high rise dot group and rise capital investments dot co i think you have a couple of other words we've got the links to our pod you know our friend that's listed our conversation just kind of click around in your podcast app you find where we have direct light links emma to both of your websites uh when folks go and visit you what would you recommend they do next probably the hardest thing it is to do is to sign up for an email list and to book a call and the reason it's difficult to do is because then you start getting chased you start getting all these email newsletters in your inbox and you've got too much spam and you don't know how to filter it, or you're on a call with somebody who's then going to start following up with you again and again and again.

15:54So people are afraid of that sales cycle that they're going to feel like they're in a sales cycle. And, but there's no other way that you're going to be able to get in on booking some business that you want. So the first step, I actually have a funnel that we have of the investor or the don't like and trust you funnel. First is anonymous. There's free info online. That's why everybody's putting out blogs, social media content, videos on YouTube, go stalk somebody online, consume their free content. It's there for that purpose. And then the next thing you would do is to sign up for some sort of an event, like a webinar, a newsletter, opt into their text messaging, and just enjoy that.

16:30As long as you're enjoying it, you can always unsubscribe or use email filters to help you to be able to sort these things. That's a very important skill when you are trying to diversify your investments, because you're not going to want to just invest with me, you're going to want to invest with a multitude and you're going to have to basically be subscribed because we send our deals out by email. So if you've unsubscribed to the newsletter, then you're not ever going to see the deals. So just learning how to organize that and keep up on what's going on would be the next step. And then booking a call.

16:55We need to find out what it is that you're looking for and get a lot of investor feedback so that what we're bringing into our portal are things that people actually want to be investing in. So sharing us your goals. Are you looking for taxes? Are you looking for more passive income? Are you young? Are you just about to retire? Are you able-bodied and want to work forever? Or maybe you're struggling with a health problem and you need to retire sooner. So we need to know that so that we can make sure that we're getting the right kinds of things in there for you. So that book a call is very important, but it's also very intimidating because people don't want to get chased.

17:24You can always opt out. Booking a call. I mean, just let them know, like, I'm not ready to make a decision right now. I'm just gathering information. And we are happy to have that conversation with you. And lastly would be to meet up in person. If they're going on a trip where you see they're going to be in a town or you're going to be in their town. Let them know. Go out for coffee. Go out, get to know each other. That gut check of meeting a person is hugely important, even in this online world. And I'm always shocked every time I meet someone. The relationship fundamentally changes. And after that, take action.

17:52You got to get on the portal. You got to learn how to fill out the documents, how to read the pro formas, all of that. And we can help you along that way with that education process. But eventually, you have to take action or nothing's going to happen. And you can do some little test investments. We have people say, I've never invested with you before. Can I come in less than the minimum so I can try you on for size? But most larger investors don't want a bunch of little tiny investments scattered all over. They want several large ones that they can keep track of. But we do encourage test investing or not investing on the first couple of deals.

18:20Just sitting back. Don't let shiny object syndrome get you. But eventually, you do need to take action and actually invest with several different operators. Yeah. Emma Powell, founder of Highrise. Pitch to actually that website, highrise.group and Rise Capital. I like this website, Invest with Emma. dot com also rise club capital dot com emma powell thank you so much for joining us yeah thank you so much for having me and that's a little bonus tip get yourself some vanity uh urls so that they're easy to remember when you're saying them out loud on a podcast invest with emma.com part with the price.com they all just lead you back to the same website but it's just scattered around and you can have um basically there are like little custom landing pages so there's a little bonus tip for you thanks emma thank you so much

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